FT Adviser has launched this DFM Insight column, based on analysis by Defaqto, to provide advisers with greater insights into how managed portfolios are run and perform.
Following the recent launch of the Defaqto MPS Comparator, Andy Parsons, insights manager, investments, at Defaqto takes a closer look at the top-performing portfolios that are categorised as being constituents of the ‘Growth’ comparator.
Each Defaqto MPS Comparator peer group makes it possible to compare various data metrics including net performance, costs and charges, and peer group asset allocations to determine underweight and overweight asset position, relative to the corresponding Defaqto MPS Comparator peer group.
The table below illustrates the top 10 performing MPS portfolios as categorised under the Defaqto MPS Growth Comparator, based on 3-year cumulative return to the end of April 2024.
Unlike the IA Mixed Investment 40-85 per cent Shares, where the disparity in returns between the top performer and 10th place on a three-year cumulative return was in the region of 14 per cent, the Defaqto MPS Growth Comparator shows a much tighter grouping of returns with a spread of only 5.2 per cent between the first and 10th-placed MPS.
In terms of outperformance compared to the Growth Comparator average return for the three-year period, all have delivered returns significantly in excess of the comparator average of 8.5 per cent.
Putting it into context, the average return over the period for the Top 10 is 20.47 per cent.
In respect of the total costs these portfolios charge, as the table clearly indicates, there is wide disparity from the Timeline 0.09 per cent Tracker – 80, which is the cheapest at 21 basis points - through to the top-performing Fundhouse Global Equity, at 98bps.
The latter is very much fighting the corner for activemanagement versus passive in the great debate.
Top 10 league table: 3-year cumulative performance to end April 2024
| Defaqto MPS Growth Comparator | Total Constituents = 244 | |||
| Portfolio Name | 3 year cumulative return* (%) | Outperformance of growth comparator average (%) | Total costs (%) | |
| 1 | Fundhouse Global Equity | 23.89 | 15.39 | 0.98 |
| 2 | AJ Bell Passive MPS 5 | 23.09 | 14.59 | 0.32 |
| 3 | Morningstar Adventurous Passive Portfolio | 22.43 | 13.93 | 0.41 |
| 4 | Timeline 0.09% Tracker – 80 | 21.35 | 12.85 | 0.21 |
| 5 | Tatton Tracker Aggressive | 19.64 | 11.14 | 0.34 |
| 6 | Schroder Strategic Index Portfolio 8 | 19.27 | 10.77 | 0.29 |
| 7 | AJ Bell Pactive MPS 5 | 18.82 | 10.32 | 0.83 |
| 8 | PAM Aggressive Global Portfolio | 18.81 | 10.31 | 0.86 |
| 9 | Parmenion Distribution Technology Passive – Risk Grade 7 | 18.74 | 10.24 | 0.37 |
| 10 | Morningstar International GBP Moderately Adventurous Growth | 18.69 | 10.19 | 0.59 |
| Defaqto MPS Growth Comparator Average | 8.50 | 0.80 | ||
| Source: Defaqto *Performance figures are those calculated and submitted by the respective DFM providers. While every effort is undertaken to ensure the accuracy and timeliness of them, Defaqto accept no responsibility for any inaccuracies in the reporting provided. | ||||
Asset allocation and key underlying holdings
Looking at the average asset allocation across the top 10 within the league table, it’s interesting to note that the Top 10 portfolios, on average, have a higher allocation to UK, North America and Emerging Markets Equity.
A higher exposure to North America has undoubtedly been a key play for many the past 12-18 months as the market has gone from strength to strength, predominantly driven by the so-called magnificent seven.
When considering UK exposure, this may be seen as slightly surprising given the relatively poor performance of the market in general, however, from a valuation perspective, it continues to provide a compelling reason to invest.
As for where the Top 10 appear to be more underweight, this is seen across assets such as UK Corporate Bonds, UK Government Bonds and Global Fixed Income.
When looking at some of the most prominent underlying holdings for those portfolios submitted, there is a clear preference for passive investments rather than active, aligning to helping reduce and minimise costs within the various portfolios.
